Revenue fails to sustain Section 153A additions without incriminating material from search operations

ITAT Delhi held that additions made by AO under section 153A were unsustainable in absence of incriminating material during search/survey. Following Kabul Chawla case affirmed by SC in Abhisar Buildwell, CIT(A) correctly deleted additions as Revenue failed to produce seized material justifying the additions. The tribunal found no infirmity in CIT(A)'s order since no incriminating materials were seized relating to the disputed additions. Decision favored assessee.

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Issues Involved:
1. Validity of additions made by the AO without incriminating material.
2. Credibility of the assessee's retracted statement.
3. Applicability of the case law M/s Pebble Investment and Finance Pvt. Ltd. Vs. ITO.

Summary:

Issue 1: Validity of Additions Without Incriminating Material
The primary issue in these appeals was whether the addition made by the AO is sustainable in the absence of any incriminating material when the assessments are unabated. The Tribunal noted that the Ld.CIT(A) deleted the additions made by the AO on the grounds that no incriminating material was found during the search. The Ld.CIT(A) relied on the jurisdictional High Court's decision in CIT Vs. Kabul Chawla, which was affirmed by the Supreme Court in PCIT Vs. Abhisar Buildwell Pvt. Ltd. The Tribunal upheld this view, stating that the Revenue could not produce any seized material to justify the additions, thus rendering the additions bad in law.

Issue 2: Credibility of Retracted Statement
The Tribunal observed that the assessee had retracted his statement made under section 133A of the Act by an affidavit and further clarified his position in a subsequent statement recorded by the DDIT(Inv.). The Tribunal found that the original statement, made under duress, was not supported by any incriminating material, and thus, the retraction was valid. The Ld.CIT(A) held that the retraction had no evidentiary value, especially in the absence of corroborative evidence.

Issue 3: Applicability of Case Law
The Revenue argued that the case of M/s Pebble Investment and Finance Pvt. Ltd. Vs. ITO was applicable. However, the Tribunal found that the facts of the present case were distinguishable as no incriminating material was found during the search, unlike in the cited case. The Tribunal noted that the principles laid down in Kabul Chawla and subsequent affirmations by the Supreme Court were more pertinent to the present case.

Conclusion:
The Tribunal dismissed the appeals of the Revenue, sustaining the order of the Ld.CIT(A) for the assessment years 2011-12 and 2013-14. The Tribunal concluded that in the absence of any incriminating material seized during the search, the additions made by the AO were not justified. The Tribunal's decision was pronounced in the open court on 29/12/2023.

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